Toxins in Consumer Products

In April 2010, the President’s Cancer Panel released a report entitled Reducing Environmental Cancer Risk: What We Can Do Now. The panel’s conclusions were alarming, although not unexpected to anyone familiar with the scientific literature, and actions taken over the past few years by the European Union and Canada.

“The true burden of environmentally induced cancer has been grossly underestimated,” the report warned. “With nearly 80,000 chemicals on the market in the United States, many of which are used by millions of Americans in their daily lives and are un- or understudied and largely unregulated, exposure to potential environmental carcinogens is widespread.”

In addition to emphasizing the dangers of toxins in food, the U.S. report warned that children are especially vulnerable to toxins, and that women often have higher levels of toxic and hormone-disrupting substances than men. These may be passed on to the next generation prenatally or during breastfeeding. The report noted that people from disadvantaged populations are more likely to work in occupations where they are exposed to toxins.

Domini’s Response

Domini has addressed the issue of toxins in consumer products for years, through our Global Investment Standards and direct engagement with companies. We pay particular attention to toxins in food.

Food Producers and Retailers

Among food producers and retailers we look for companies that favor or promote organic and sustainable agriculture. Whole Foods features organic foods and is committed to offering lines of food that are free of artificial flavors, sweeteners, colors, preservatives, and added chemicals. In the United Kingdom, Marks & Spencer features some 450 organic food products, sources food as much as possible from the U.K. and Ireland, and has taken steps to remove transfats and artificial flavors and to reduce salt from its branded food line. The Chinese company Chaoda Modern Agriculture, which produces and sells crops and livestock, has a policy of using as little chemical fertilizer as possible. It reportedly uses physical barriers, natural predators, and crop management to combat pests, using pesticides as a last resort.

Domini will not invest in major producers of synthetic pesticides and agricultural chemicals such as the U.S. companies Dow Chemical, DuPont, FMC, Mosaic, and Monsanto, the European companies BASF, Bayer (a leading producer of bisphenol-A), and Syngenta, and the Asian companies Mitsui Chemicals, Nissan Chemicals, Sumitomo Chemical, Taiwan Fertilizer, and Wesfarmers.

The Chemical Industry

Within the chemical industry, we look for companies that develop “green chemicals.” Novozymes of Denmark, for example, makes bio-based fertilizers and insecticides, and supplies enzymes that can produce ethanol from cellulose at a price competitive with gasoline. Through a joint venture with Nature Works, Teijin of Japan is among the world’s largest manufacturers of bioplastics. It also offers an alternative to asbestos for use in brake pads. DIC of Japan produces a variety of products that reduce pollutants, including soy-based paint and ink as well as wood sheets that do not contain volatile organic compounds (VOCs), which are tied to sick-house syndrome.

Engaging with Companies

Toxins in consumer products are ubiquitous, and under-regulated. As investors, we have a unique opportunity to place these issues on the agenda of major corporations. We therefore engage companies on toxins in consumer products through proxy voting, shareholder proposals, and direct dialogue. Domini has been a leader on this issue, and is a member of the steering committee of the Investor Environmental Health Network (IEHN), a coalition of investment managers with more than $41 billion in assets.

We filed our first shareholder resolution on this topic with Avon Products, in 2003. Working with Breast Cancer Action, our resolution addressed the use of parabens, a chemical preservative commonly found in cosmetics and other consumer products. Scientific studies suggested that parabens could present health risks and may be linked to breast cancer. The proposal was the first of its kind. We returned to Avon with several related proposals, ensuring that the safety of Avon’s products remained on the company’s formal agenda for several years running. Our engagement helped to raise awareness among Avon management, and prompted Avon to speak publicly about these issues for the first time.

In 2010, we filed a shareholder proposal with Coca-Cola, asking the company to consider alternatives to the use of bisphenol-A (BPA) in the lining of its beverage cans. Our proposal — the first of its kind — received more than 20% support at the company’s annual meeting. The company subsequently produced a public statement on the safety of BPA. Our dialogue continues.

We have engaged several companies on the use of polyvinyl chloride (PVC) plastic in packaging. PVCs are hazardous throughout their life cycle, and they release carcinogenic dioxin when incinerated. Working with other investors, we helped convince Target to reduce its use of PVC in infant products, children’s toys, shower curtains, packaging, and fashion accessories. In 2008, after we filed a shareholder resolution with J.C. Penney, the company agreed to develop a policy on the use of PVC in products and packaging and to begin replacing PVC with safer, more sustainable materials.

More recently, we have paid particular attention to the environmental risks posed by hydraulic fracturing (more commonly known as “fracking”), a technology used by energy companies to extract natural gas and oil that is trapped in shale deposits deep underground. We have engaged with a number of companies on this topic, including Apache, Anadarko Petroleum and Southwestern, and contributed comments to a comprehensive set of best management practices designed to mitigate these risks, published by IEHN and the Interfaith Center on Corporate Responsibility.

We have also submitted proposals and engaged corporate management in dialogue on the use of brominated flame retardants and nanotechnology.

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